[At a Crossroads for Listed Companies] Biolog Device, Suspicious CB Transactions of Major Shareholder Affiliates②

Capture of the BioLog Device homepage.

[Asia Economy Reporter Jang Hyowon] Suspicious convertible bond (CB) transactions were detected after the largest shareholder of KOSDAQ-listed company Biolog Device changed to Geumseong Livestock Promotion.

According to the Financial Supervisory Service's electronic disclosure on the 27th, on March 25, a corporation named ‘CILT’ acquired 16.8 billion KRW face value of Biolog Device’s 3rd series CB from existing investors such as UI Venture Investment Association and IBK Capital.

The conversion price per share of the 3rd series CB was 1,433 KRW, but CILT purchased it at 1,576 KRW per share, a 10% premium, totaling 18.5 billion KRW. This CB was issued on February 28 of last year and was convertible into shares at the time of the transaction. Since Biolog Device’s stock price was moving between 1,500 and 1,700 KRW at that time, the CB transaction price was considered reasonable.

CILT, which purchased this CB, is a company closely related to Geumseong Livestock Promotion, the largest shareholder of Biolog Device. CILT is a corporation established with a capital of 50 million KRW, with CEO Park Chansu as the sole director.

CEO Park Chansu operates the investment company Black Hill. Black Hill and Geumseong Livestock Promotion have a partnership, where Black Hill acts as the general partner (GP) and Geumseong Livestock Promotion as the limited partner (LP) in a private equity fund (PEF) that acquired a listed company called ‘Hanp’, which recently underwent rehabilitation procedures.

When CILT purchased the CB, it borrowed about 1.8 billion KRW from Geumseong Livestock Promotion as a down payment. CILT is a corporation with total assets of 300 million KRW. However, it did not disclose how it secured funds other than the 1.8 billion KRW.

CILT, which acquired the CB with unclear funding, sold all the CBs to 14 individuals about ten days later, on April 5. The selling price was the same as the purchase price of 1,576 KRW per share.

However, Biolog Device’s stock price continuously rose from the moment CILT purchased the CB, exceeding 2,500 KRW on April 5. Despite the potential for about a 58% profit, CILT sold the CB at the same price it bought.

After the CBs were transferred to individuals, all were converted on April 8. This released a large volume equivalent to 40% of the existing issued shares into the market. Nevertheless, Biolog Device’s stock price continued to rise until the listing date of the converted shares on April 28, and even reached around 6,000 KRW afterward.

Coincidentally, from April 12 to April 15, Biolog Device was designated as a stock with excessive involvement of a small number of accounts in buying for four trading days. This designation occurs when the top 20 trading accounts account for more than 30% of total trading. On April 15, the buying involvement rate of the top 20 accounts rose to as high as 56%.

Accordingly, if the individuals who purchased the CB had sold immediately after listing, they would have earned about 15.2 billion KRW in profit, and if sold at the peak, approximately 50 billion KRW.

An investment banking (IB) industry insider said, “It appears that the CB volume was sold down, and there was likely an agreement allowing individual investors, CILT, and Geumseong Livestock Promotion to all profit.”

Regarding this, Biolog Device stated, “While it is true that Park Chansu, CEO of CILT, is also CEO of Black Hill, the CB acquirers are not acquaintances of the major shareholder but simple individual investors,” and “Although disclosed, CILT was not involved, and the transaction was directly between existing CB investors and individual investors.”

However, they did not respond to inquiries about why CILT sold the CB to individual investors at a low price despite the potential for profit, or whether the disclosure was false if CILT was not involved.